It’s very risky for an American credit ratings agency to downgrade the US Government.

Standard & Poor’s found out when it stripped the US off its AAA rating in 2011 over the debt-ceiling charade. The Department of Justice then sued S&P over its role in the financial crisis, i.e. for slapping AAA-ratings on toxic securities to pocket fatter fees from issuers. But the other ratings agencies did the same thing and have not been hounded. So S&P claimed that the “impermissibly selective, punitive and meritless” lawsuit was “in retaliation” for the downgrade.

Though the Government denied the retaliation angle, it was a lesson no credit ratings agency within the long and sinewy arm of the Government would ever forget. But now Fitch is inching gingerly toward that abyss. While it affirmed (text) the US at AAA, Outlook Stable, it threw in some potentially devastating caveats.

So endowed, “the US rating can tolerate a higher level of public debt than other ‘AAA’ sovereigns.” The “threshold” for the US is a gross national debt of 110% of GDP, the highest threshold of any country “owing to its exceptional financing flexibility.” But if the US hits that 110%, it would be “incompatible with ‘AAA.”’

Other factors also contribute to that “exceptional financing flexibility,” including America’s vast and liquid capital markets, its “large, rich, and diverse” economy, “one of the most productive, dynamic, and technologically advanced in the world.” Nevertheless, growth in that miracle economy in 2014 is going to be a “sluggish” 2%, just above stall speed. And Fitch sees the medium-term growth potential at a languid 2.2%.

The budget deficits will be shrinking only through fiscal 2015. In fiscal 2016, they’ll be rising again, due to, among other reasons, “higher net interest costs” as rates go up. Fitch hopes that normalization of monetary policy would “not fundamentally destabilize the recovery or financial markets.” But it would trigger more volatility. And “downside risks are material….”

Other issues are also dogging the US: High external liabilities, a result of “persistent current account deficits and low national savings rates,” which make the economy “more vulnerable to adverse external shocks.”

So Fitch estimates that the gross national debt – “excluding trade payables and unfunded pension liabilities, consistent with EU countries” – would hit 100% of GDP at the end of 2014. It sees a “debt peak” of 104% of GDP in 2024, based on this way of counting, which excludes any kind of recession or a market swoon. Since this 104% is “below the threshold of 110%,” Fitch does not “anticipate” a downgrade.

“However…”

A downgrade would be triggered by: “material deterioration in the coherence and credibility of economic policymaking,” whatever that means in Washington; a deterioration of the deficits and the debt-to-GDP ratio; and an erosion of “the role of the US dollar as the pre-eminent global reserve currency.”